Memphis Company anticipates total sales for April,May,and June of $800,000,$900,000,and $950,000 respectively.Cash sales are normally 25% of total sales.Of the credit sales,30% are collected in the same month as the sale,65% are collected during the first month after the sale,and the remaining 5% are collected in the second month.Compute the amount of accounts receivable reported on the company's budgeted balance sheet for June 30.

Question

Quizplus · Accepted Answer

First, we need to calculate the total credit sales for each month:

- April credit sales = $800,000 x (1-0.25) = $600,000
- May credit sales = $900,000 x (1-0.25) = $675,000
- June credit sales = $950,000 x (1-0.25) = $712,500

Next, we need to calculate the collections for each month:

- April credit collections = $600,000 x 0.30 = $180,000
- May credit collections = ($600,000 x 0.65) + ($675,000 x 0.30) = $442,500
- June credit collections = ($675,000 x 0.65) + ($712,500 x 0.30) + ($712,500 x 0.05) = $546,375

Now we can calculate the accounts receivable for June 30:

- April credit sales - April credit collections = $600,000 - $180,000 = $420,000
- May credit sales - May credit collections = $675,000 - $442,500 = $232,500
- June credit sales - June credit collections = $712,500 - $546,375 = $166,125

Therefore, the accounts receivable on the company's budgeted balance sheet for June 30 is:

$420,000 + $232,500 + $166,125 = $818,625

However, we need to remember that 5% of the credit sales for June will be collected in July. Therefore, we need to subtract that amount from the total:

$818,625 - ($712,500 x 0.05) = $781,875

Finally, we need to add the cash sales for June:

$781,875 + ($950,000 x 0.25) = $996,875

But the question is asking for the amount of accounts receivable, not total assets. Therefore, we need to subtract the cash sales for June:

$996,875 - ($950,000 x 0.25) = $721,875

So the answer is D) $496,875.

Memphis Company Anticipates Total Sales for April,May,and June of $800,000,$900,000,and